AMZN Keeps Hitting New Highs as Street Cheers New Kindles

By Tiernan Ray

Shares of Amazon.com (AMZN) are up $7.10, or almost 3%, at $258.48, briefly hitting a new all-time high of $259.42 today, after the company yesterday announced several additions to its Kindle and Kindle Fire line of e-readers and tablets, some of which runs on a modified version of Google‘s (GOOG) Android operating system.

The response has been fairly favorable from the Street today, with even some price target increases here and there, though no one is going so far as to predict how well Amazon can take share from Apple‘s(AAPL) iPad in the tablet market.

There do not appear to be any estimate changes, as analyst wait to get a further sense of what the margins will be on devices they all call “aggressively priced,” with the cheapest Kindle now $10 cheaper than before at $69.

Interestingly, the announcement is not doing much good for component suppliers: Texas Instruments (TXN), which supplies the chip, has seen its shares slip 46 cents, or 1.6%, at $29.09, while Nvidia (NVDA), which has lost the Kindle Fire slot for the second year in a row, is down 44 cents, or 3.2%, at $13.29.

Mark Mahaney, Citigroup: Reiterates a Buy rating on the stock and a $275 price target. “We had assumed that AMZN would refresh its eReader & Tablet line-up, and continue to be aggressive with pricing and products. And, assuming 2nd generation Fire holds up as well as 1st generation Fire (with perhaps 20% market share in less than 12 months), there should be a path here to multi-million unit sales in the near- to medium-term for both the new eReaders and the Fire. But we would expect this to come with continued pressure on margins. Unit economics will require a detailed BOM (Bill Of Materials) analysis, which we won’t be able to do until the products ship.”

Atul Bagga, Lazard Capital Markets: Reiterates a Buy rating and raises his price target to $300. “We are generally positive on AMZN’s upgraded Kindle reader and Kindle Fire lineup, which we believe are priced competitively with some unique features for a broad audience. The tablets pack impressive hardware with quad core OMPA4, dual antennae, Dolby digital sound with dual stereo speakers. They also have some unique and differentiated software features such as Whispersync and X-Ray for books, movies and games, FreeTime for parental controls, and a new email application with Exchange support, which should make them compelling to enterprise users […] We believe that a well integrated hardware and digital media platform should help drive the company’s digital media strategy, which we estimate could be a $65B market opportunity by 2016 with meaningfully higher margins than the core e- commerce business.”

Chad Bartley, Pacific Crest: Reiterates a Sector Perform rating on Amazon. “We are optimistic on the new 7 inch tablets, but cautious on the 9-inch tablets. Amazon’s entry-level Kindle Fire SD device will sell for $159 and ships on Sept. 14. This is a very attractive price, in our view, and performance appears to be improved compared to the original Fire […] The 7-inch Kindle Fire HD will sell for $199 and $249, and also ships on Sept. 14. We believe it is a more attractive device than the Nexus 7. The 9-inch Kindle Fire HD will sell for $299 and $369 and ships on Nov. 20. However, we expect strong competition from the iPad Mini, which should be announced next month and start at $299. The 9-inch Kindle Fire HD with 4G LTE is attractively priced at $499 and $599, compared to similar iPads at $729 and $829, but it is unclear how much demand there will be for this device and a limited data plan. One thing is clear—Amazon will price its Kindle devices aggressively to compete and sell content, apps, services and products.”

Peter Misek, Jefferies & Co.: Reiterates A Buy rating on Apple shares and a Hold rating on Hewlett Packard (HPQ). (His colleague Brian Pitz has a Buy rating on Amazon shares.) “As Amazon is selling its feature-rich tablets at cost, we believe it will become exceedingly difficult for others to enter the tablet market. We see very little chance that Dell and HP can successfully attack the consumer market with Windows 8 tablets. In light of this, we now view HP’s decision to reenter the mobile market after wasting $1.2B acquiring Palm as another potentially fruitless exercise. Additionally, on the traditional PC front, we believe Amazon’s new Fire tablets will add even more headwinds.”

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